UK Construction: the slump may be short lived, business expectations and hiring both picked up

UK, April 15, 2018.-Recent news about UK construction on Bloomberg. I only mention the main headline, and the last two lines of the text:

“U.K. Construction, Hit by March Snow, Shrinks Most Since 2016. Civil engineering activity fell the most in five years, commercial activity declined, and house building increased slightly. But in a sign the slump may be short lived, business expectations and hiring both picked up, Markit said”.

For its part, Reuters published similar information on the health of the construction sector in the UK:

Britain’s construction industry seized up due to heavy snow last month, prompting the biggest drop in activity since just after 2016’s Brexit vote, an industry survey showed on Wednesday. The IHS Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) slumped to 47.0 from 51.4 in February. It was a bigger decline than had been predicted by any economist in a Reuters poll, which on average pointed to a modest drop to 50.8. The 50-point line divides expansions in activity from contractions.

Reuters adds more data of the same information: Last month, an unusual Siberian weather system that British meteorologists dubbed “the Beast from the East” brought snow, strong winds and the coldest temperatures in several years to much of Britain and elsewhere in Europe. House building was little affected, but the storm clobbered other sectors, the survey showed.

Civil engineering firms suffered their biggest downturn in five years. The survey’s index for commercial work, which had recovered in January and February, staged its biggest one-month drop since 2009.“The construction sector remains the problem child of the UK GDP breakdown,” Scotiabank economist Alan Clarke said.

Construction makes up only about 6 percent of British economic output but is watched closely as a guide to investment and sentiment in the wider economy. Official data show construction output declined throughout the last three quarters of 2017, with respondents in the PMI survey repeatedly citing Britain’s vote to leave the European Union as weighing on new business.

The sector could tilt the balance between a weak reading and an okay reading when first-quarter economic growth figures are released on April 27, Clarke said. Nonetheless, Bank of England officials, who are widely expected to raise interest rates in May, are unlikely to be perturbed by a single month of weak construction figures. A separate PMI published on Tuesday showed manufacturers shrugged off the bad weather [GB/PMIM].

There were also signs that a rebound in construction should follow in April. Optimism among construction companies reached a nine-month high in March and they hired workers at a faster pace.

Great challenges of construction

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Any challenge, any major civil engineering work is a challenge for construction professionals. After reading the conjuncture of the construction sector in the UK, I would like to mention a singular project. I was pleasantly surprised:

Over twice as tall as the Statue of Liberty and Elizabeth Tower (Big Ben), the world’s largest wind turbine will stand at more than 260 metres when measured from base to blade tip, with 220-metre diameter rotors, and generate enough clean energy for 16,000 European households.

And it’s all in the name of efficiency, as larger blades make turbines more resilient to variations in wind speed, says GE Renewable Energy general manager Vincent Schellings, whose team is developing the immense wind turbines. 

Schellings says: “From a technology perspective, it seems like a stretch. But we know it’s doable. The beauty of the turbine is that it gives an edge over the competition. There’s nothing like this. Not even close.” 

The sheer size of GE’s turbine, called Haliade-X, means you can catch a lot of wind, which is good for energy production, but the downside is that you need the support structure to keep the rotor up in the wind, Schellings says. 

“It’s kind of unfortunate that as you scale the rotor size, the turbine costs will go up quicker than the incremental yields you get from the larger rotor.”

He says the team solved this problem with software, using algorithms to process data from the turbine and offset the high forces the wind produces. “We use software to control the pitch of the turbine and keep it in the wind. It helps us keep the size and the weight of the support structure under control,” Schellings says.

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